A Very Low Rate of Inflation During a Recession Can

question 138

Multiple Choice

A very low rate of inflation during a recession can lead to:

• A) a liquidity trap, which makes monetary policy ineffective.
• B) a liquidity trap, which makes monetary policy effective.
• C) government budget deficits.
• D) government budget surpluses.

---

Definitions:

Eyewitness

A person who directly observes an event and can provide testimony or information about it.

Biased

A tendency to favor or lean towards a particular perspective, conclusion, or response, often in a way that is considered to be unfair or biased against other options.

Tapped

Accessing a resource or obtaining information from a specific source; also refers to gently striking something.

Emotion

A complex psychological state involving an individual's subjective experience, physiological response, and behavioral or expressive response.